First time homebuyers often wonder about the various steps involved in the homebuying process. It's easy to become overwhelmed, and sometimes even a little discouraged at first.
Skyline Properties has prioritized the steps into these concise elements. Follow them and you'll be in your dream home before you know it!
According to a 2013 CBS News’ 60 Minutes investigation, as much as 40 million individual mistakes exist in the American consumer credit reporting system. This means 1 in 5 consumers have at least one mistake on their credit report and the likelihood of an error existing on your credit report is high unless you are taking active precautions and check your report regularly. There are three large credit reporting bureaus: Transunion, Experian, and Equifax. The credit records of most, if not all, Americans who have had any type of credit issued to them ranging from a water bill to a land purchase are held by these agencies. If you have a mistake on your credit report, these agencies should be able to assist you in clearing the discrepancy. However, some of these disputes may be costly in terms of both time and money. Because of this, the first steps to your home-buying process should be to check your credit report, correct any errors, and find out your credit score.
Lenders are competing for well-qualified homebuyers and a good possibility exists that you will have many lenders to choose from. However, your choice of lender may or may not be narrow due to the results of your credit report check and scoring. Financing a house will likely be the biggest financial decision you make in your life, so do your research to find out which lender best suits your needs while offering terms and conditions you feel most comfortable with. This step in the home-buying process can be the most tedious, but it should garner a fair amount of your effort, as it will have the most long-term impact on you as a homeowner.
You'll want to make sure that you are getting pre-approved not just pre-qualified. Pre-approval means that you have a letter from a financial lending institution stating that they are intending to lend to you in order to purchase a home. This means that they have reviewed your debt-to-income ratio, looked at your credit score, and determined what they are willing to lend you based on their perception of what you can reasonably afford to repay. This letter will state the maximum amount they are willing to loan you for your new home purchase. This step is crucial in the process, as it could be a waste of your time and your broker’s time to skip this step and be disappointed in what your price range of properties is if you search before getting pre-qualified. It is important to note that most lenders have a 60-90 day validation window on pre-approval letters, meaning: you will need to find a house within that timeframe or re-apply.
Due to its fiscally fluid nature, the real estate market changes rapidly, often without notice, and is tricky to navigate unless you are a seasoned and involved real estate insider, namely: a real estate broker. A high-speed real estate broker is your key to transitioning from a potential homebuyer to a key-holding homeowner. Market over-watch, overcoming obstacles, keeping with current trends, locale awareness, negotiations, etc. are all difficult issues to tackle on your own without the assistance of an informed broker. Top financial and real estate experts agree that hiring an broker will most likely save you money by the closing of your deal. It is wise to search online and offline, asking friends and family for referrals, in order to find the perfect fit for you and your needs as the broker you choose will be closely involved in every aspect of your new home purchase.
Let’s face it: most people want to have more than they have. The higher-priced property looks so much better than the realistically-within-our-budget-priced property that our eyes become glazed over by the magical charm of the house we should have never even teased our eyes with to begin with. This is a case of the classic Wants vs. Needs Dilemma. You might want a circular driveway out front, but you really need a fourth bedroom. You want the soaking tub, but you need the shorter commute. These are scenario-based traits of homes that some potential homeowners simply haven’t taken the time to consider: what do you want vs. what do you need? Under this determination of needs, you must also consider realistic location needs versus desirable location wants. The best way to determine all of these wants versus needs is to write them all out and discuss the list with your partner, your close friends, and your real estate broker.
You have finally arrived at the day you will begin to physically see your future. This is a very fun step in the process, but also the most time consuming. If you have followed each step up to this one, you will have realistic and sensible boundaries of the homes you are able to purchase. There are numerous MLS service sights that will allow you to view multiple properties from the comfort of your own living space, without the hassle of time-consuming travel on each whim you choose. Consult with your real estate broker and search your potential area for homes within your price range so once you actually do hit the road to take a housing tour with your broker, you will have a good idea of what you’re going to see prior to seeing it. Needlessly looking at properties you haven’t researched with your broker can be fun, but it can also lead to distrust between you and your broker due to the sheer number of hours it takes to set up these tours. A pro tip is to check out potential new home locations during the hours of darkness to determine if this new location suits your personal tastes.
Once you have found your potential new home, it is time to make an offer. Making an offer is done through your real estate broker and is often about 5% below the asking price. However, depending on how competitive the market is, the offer could be more than the asking price. You can gather information on completed listings through your broker to gain a better idea of what your potential new home will close at. This price is determined by many factors including the seller’s acceptance of what price they feel is appropriate. Be patient with this step as it involves many parties and could take days to weeks to accomplish.
There are many types of structured mortgage loans available, but there is a good possibility that you will only qualify for a few. The three basic terms of home loans that you should be familiar with are: fixed rate, adjustable rate, and interest-only. Fixed rate loans are the most predictable since the interest rate is non-variable and carries a high degree of reliability for homeowners that plan to stay in their homes for 15-30 years. Adjustable Rate Mortgages (ARMs) typically offer homebuyers a lower initial interest rate for the first one to seven years, then may fluctuate year-to-year based on market conditions. Homebuyers who don’t plan to live in one house for long periods of time often prefer ARM loans. Interest-only is an option offered to some homebuyers that requires only the interest of the home loan to be paid for a specified amount of time. This allows a higher cash flow due to decreased payment, but having no set amount of the payment going towards the principal, appreciation of home value is the only sure way to build equity through an interest-only payment standard.
You have finally arrived. Almost. Closing the deal may become a difficult task because many factors are involved. Not only should you be concerned with move-in dates and a home inspection but there is always the potential that new fees will arise. Closing costs are best discussed with your mortgage lender, but a general breakdown includes: down payment, title fees, appraisal fees, inspection fees, legal fees, and any points you may have bought down to lower your monthly payment. Your broker can give you more detailed information on each of these potential fees, but now you know there are at least some closing fees required.
The real arrival – the move. There are vast amounts of resources available online that give great insight into the best way to make a happy move. Consulting with your real estate broker can also be helpful, as they will have information for you to utilize. Welcome to homeownership.